And among the circles I travel in, most of the angst over this action is found in the intersection between energy issues and the once-again rising level of geopolitical tension.

But before we turn to the energy implications, here’s what exactly is happening in Washington.

As I write this, President Donald Trump just announced he will not recertify Iranian compliance with the Joint Comprehensive Plan of Action (JCPOA).

That’s the two-year-old agreement between Tehran and six major Western nations designed to limit Iran’s nuclear weapons program.

The primary EU nations have already indicated they will move immediately to support JCPOA and break with any U.S. action, thereby driving yet another wedge between the U.S. and its erstwhile allies in the European Union.

And while Iran might end up not being hurt much at all…

Here’s why U.S. oil companies will suffer.

Iran May Be Bad – But It Didn’t Break the Deal

Crucially, the JCPOA agreement is between Iran on the one hand and the permanent members of the UN Security Council – the U.S., UK, Russia, China, and France – plus Germany on the other.

Central to the accord is a tradeoff between Iran foregoing a nuclear arms program, at least in the medium term, in return for a phasing out of Western economic sanctions. The International Atomic Energy Agency (IAEA) is tasked with the monitoring of Iranian compliance.

Every party, including the U.S., has acknowledged that Tehran has lived up to its end of the bargain.

The IAEA has been provided with unparalleled access to Iranian facilities. The agency has certified that Iran is abiding by the provisions both for the development program itself and the existing nuclear stockpile.

The problem for Trump is that the deal became a staple element of his stump speech during the presidential campaign.

Meanwhile Iran has continued its ballistic missile testing program, has stepped up support for the Syrian regime and Hezbollah, while the administration in Washington views the Iranian Revolutionary Guard Corps (IRGC) as a terrorist organization.

This view of the IRGC has been shared by the two previous administrations.

Now, all three of these considerations are certainly disconcerting. But the problem is that none of these is part of the JCPOA.

Trump wants to use matters not part of the accord to scuttle it.

A number of international leaders are saying both in public and in private that to do so would be tantamount to challenging the status of the U.S. as a credible partner in any international negotiations.

As one of my Russian colleagues put it last week, “One does not improve the trade in oranges by adding apples.”

Actually, the President not certifying the JCPOA (something he did earlier this year) is not the end of the accord. Instead, it moves the matter to Congress, which has to decide whether sanctions should be renewed.

Politics notwithstanding, the renewal of sanctions will prove difficult in the absence of any indication Iran has not abided by JCPOA provisions.

Nonetheless, it will have an impact on global energy markets. ..

American Oil Companies Will Be Left Out in the Cold

The combination of a possible renewal in Iranian nuclear arms development with the chance that oil exports from the region may be adversely impacted by rising tensions simply adds some substance to the crisis.

Then there’s the prospect that a JCPOA collapse may undermine the OPEC-Russia oil production cap.

After all, Iran will certainly respond to re-imposed sanctions by increasing exports, further eroding confidence among other OPEC members that restraining production is in their national interests.

In response, proponents of renewing American sanctions would point out that those restrictions would include a return to prohibitions against shipping (and providing insurance for) consignments of Iranian crude as well as blocking access to essential outside banking.

The latter would block the hard currency Iran needs to pre-finance exports.

But the problem this time around involves whether allies and others will continue to abide by such U.S.-initiated actions.

With European allies, Russia, China, and even some Persian Gulf parties (Qatar and its banking center in Doha, for example) still supporting the JCPOA, a break with Washington is likely.

So Tehran would still be able to get the needed banking from elsewhere, circumventing any returning U.S. sanctions relatively easily.

Additionally, while U.S. oil exports are again reaching levels not seen since the early 1970s, that doesn’t mean American crude could replace Iran’s in the market.

At levels approaching 1.5 million barrels a day, the potential for further flexible export capacity for U.S. production is limited.

So those hoping the end of JCPOA will usher in better returns for American oil companies because of higher oil exports may well be in for a major disappointment.

The opportunities for increasing sales, if any, are more likely to be experienced by OPEC members. They would now have a greater ability to exceed their production cap without depressing overall prices.

And that’s the short term.

In the medium term, the implications for U.S. oil players are not good without the JCPOA.

See, both European energy majors and their continental sources of finance are now quite far along in negotiating deals to extract oil and gas in Iran, as well as for major liquefied-natural-gas (LNG) export contracts.

Those will continue, with the European home governments of both companies and banks supporting the ventures. Their views of what’s in their national interest will start to separate form those emanating from Washington.

American companies will be left out in the cold, while U.S. sanctions will do little to Iran without the buy-in from allies.

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It is obvious that leadership is lacking in the White House! It is evident that the present administration does not have the skill set to see the damage to foreign relationships and domestic markets by the choices it is making. Resolution? Congress (Republicans) must break away from the wayward decisions of the President and the American people must elect a new leader in 2020.

With all the talk of pipelines, and Petri-chemical power generation, not to mention hydro and solar/wind, I have never heard a word regarding Nicola Tesla’s generators. If a sixteen year old can spend $50.00 on a parts that generates a good amount of energy even in a darkened closet…. Oops, but then there would BE no Standard Oil, BP, (etc.) pipe-lines, OPEC, fracking, or need for dams. Now wouldn’t THAT put a damper on the economy.

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